Government pledges $8.1 million and crackdowns to ensure small businesses are paid on time

The Albanese government has accepted all the recommendations of an independent payment times review and committed $8.1 million to speed up payment times, crack down on non-compliance, and name and shame big businesses that fail to pay small businesses on time.

Announcing its response to the independent review of the Payment Times Reporting Act 2020 at an event in her electorate today, Minister for Small Business Julie Collins promised that the initiatives will “level the playing field to ensure small businesses are paid on time”.  

“This is a matter of fairness,” said Minister Collins. “Big businesses should not take advantage of Australia’s 2.5 million small businesses by failing to pay them on time.”

Conducted by Dr Craig Emerson, economist and former Labor politician, the review identified a clear case for the government to hold large businesses to account and improve the payment times to small businesses.

The Payment Times Reporting Regulator already operates the Payment Times Reports Register, an online tool designed to help small businesses determine which businesses actually pay on time.

However, the review found that measures encouraging big businesses to report their payment times have “not been achieved efficiently or effectively”.

Since the Payment Times Reporting Scheme commenced in 2021, the proportion of small business invoices paid within 30 days has increased by less than 5%, from 62.9% to 67.6%.

Minister Collins announced that the Albanese government agrees with all the review’s recommendations and will commit $8.1 million to support initiatives designed to deliver better outcomes for small businesses. 

Once legislated, the reforms should be a big boost for small businesses with faster payment times improving cash flow, alleviating administrative burdens, and reducing financing costs. 

Minister Collins argued that better payment times lead to gains in productivity, supporting higher wages and profits, and expanding employment opportunities. 

Albanese government commits to recommendations

In accepting the review in full, the Albanese government commits to actions including: 

• Increasing pressure on big businesses to improve payment times by highlighting the best and worst payment performers.
• Overhauling the Payment Times Reporting Act 2020 to simplify and streamline reporting, add regulatory powers, and address inefficiencies with current reporting requirements and processes. 
• Ensuring payment times are considered when developing relevant government reforms and policies, including unfair trading practices reforms, eInvoicing, and government procurement. 
• Reducing the regulatory burden for entities reporting under the Payment Times Reporting Scheme.  

Speaking to the media at a press conference on a mushroom farm in her electorate of Franklin, Tasmania, Minister Collins said local businessmen like farm owner Dean Smith would be big beneficiaries of the changes. Tunnel Hill Mushrooms grows fungi for the restaurant trade in an old 1891 railway tunnel outside Hobart.

“I have a lot of experience with big business in town,” said Smith. “Generally it’s great, but when it comes to time to pay I can be chasing the invoices up, which isn’t great for a small business like myself. I’m the only person that works here, and I don’t really have time to chase the payment.”

“I’m relying on that money to come in, if it’s not paid on time it can put my business under pressure.”

As she left the announcement, Minister Collins found time in her busy schedule to snap a quick picture of a beautiful free-range chicken.

No maximum payment times for big businesses

Notably, the statutory review does not recommend the establishment and enforcement of maximum payment times.

It found that enforcing maximum payment times would “create a major risk of disincentivising large businesses from procuring goods and services from small businesses.”

Nevertheless, the decision not to announce a payment time cap is at odds with Labor’s pre-election push for 30-day payment times, says Luke Achterstraat, CEO of the Council of Small Business Organisations Australia (COSBOA).

“The government made an election commitment to ensure small businesses are paid on time and ensure a mechanism for payment within 30 days,” Achterstraat said in a statement.

“Further work will be required to fulfil this commitment and COSBOA looks forward to working constructively with government.”